Lockdown extension to hit India’s nascent Electric Vehicle industry adversely?

Posted on 19 Apr 2020

In post-Covid era the government needs to create a balance in maintaining air quality as well as fiscal health of the industries, including the EV industry. While optimism is always welcome, the Indian e-vehicle industry needs to brace itself for some tough times ahead and only time will reveal how the industry tides over this situation in the long-term.

Environment enthusiasts meanwhile point to the drastic improvement in air quality in highly polluted cities like Delhi, Mumbai and Bangalore, etc., where economic activities and transportation has more or less come to a grinding halt. Interestingly, in the lockdown period India also switched to Bharat Stage VI (BS VI) from April 1 onwards as mandated by the Supreme Court of India. Oil companies started selling Euro VI emission compliant fuels. The lockdown has set the template for revealing what clean fuels can do for the environment and overall health of the population. Shift to e-vehicles can happen but gradually and in phases.

Government of India’s ambitious target of shifting to e-vehicles in a big way by around 2030 is also likely to be dented with conventional automobile manufacturers who are struggling to clear their stockpile of BS-IV inventories. Forcing auto industry to adopt e-vehicles in their manufacturing ecosystem is likely to yield bad results and the government will have to relax its EV push and perhaps deploy alternative fuels like auto LPG, CNG, biogas, and so on, to address environmental concerns.

SMEV data reveal that electric vehicles which form less than 1% of the total vehicle sales has the potential to grow to more than 5% in the coming years. There are more than 5 lakh two-wheelers and a few thousand electric cars running on the Indian roads. However, industry volumes have been fluctuating mostly depending on incentives offered by the government. EV dealers in a Tier-3 town for example has to sell at least 10 electric two-wheelers and 4-5 e-rickshaws a month to have some profits in their kitty to run the business and which looks hazy in a post-Covid scenario where people will be conserving cash.

“Electric vehicle industry is in vulnerable stage and a network collapse could happen once the lockdown ends. Most dealerships are small time operations and there aren’t any backup support. Since the EV dealerships aren’t capital intensive, they attract small investors,” Sohinder Gill was quoted by the Times of India as saying. It is testing times for India’s electric vehicle market which is still in its nascent stage.

Industry sources reveal that although as low as Rs. 3-5 lakhs alone is involved in running an electric vehicle dealership, small businesses wouldn’t be in any position to run the show as they have overhead expenses in the form of salaries, rents and other miscellaneous expenses until the lockdown lifts. It is going to be extremely tough, the world will change post-Covid 19, it will not be what we saw a few months ago, they say.

As per the Society of Manufacturers of Electric Vehicles (SMEV), the apex body for EV industry in India, around 15% of electric vehicle dealers could shut shops in the near term due to crunch of cash liquidity. Manufacturers say that two-wheelers and e-rickshaws, popular in Tier 2, Tier 3 and perhaps even Tier 4 towns, are bought by first-time entrepreneurs who wouldn’t have the money to shell out in the post-Covid 19 world.

The Covid-19 pandemic is accentuating not just auto sector woes which was perhaps looking at some form of recovery post the slowdown witnessed last year, but also will hit a big segment of the customers who were likely to buy e-vehicles.

In its efforts to contain the spread of the novel coronavirus (Covid-19), a pandemic which is spreading its wings fast and furious across the world including India, the Government of India announced lockdown extension upto May 3, 2020.